BILL ANALYSIS Ó
AB 515
Page 1
ASSEMBLY THIRD READING
AB
515 (Eggman)
As Amended May 4, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+----------------------+--------------------|
|Revenue & |9-0 |Ting, Brough, | |
|Taxation | |Dababneh, Gipson, | |
| | |Roger Hernández, | |
| | |Mullin, Patterson, | |
| | |Quirk, Wagner | |
| | | | |
|----------------+------+----------------------+--------------------|
|Appropriations |17-0 |Gomez, Bigelow, | |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Gallagher, | |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Gordon, Holden, | |
| | |Jones, Quirk, Rendon, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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AB 515
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SUMMARY: Expands the existing tax credit program under the
Personal Income Tax (PIT) Law and Corporation Tax (CT) Law for
contributions of qualified donation items to a food bank and
extends the program until January 1, 2021. Specifically, this
bill:
1)Revises the definition of a "qualified taxpayer" (QT) to include
persons responsible for growing or raising a qualified donation
item, or harvesting, packing, or processing a qualified donation
item.
2)Revises the definition of "qualified donation item" (QDI) to
include, in addition to fresh fruits and vegetables, the
following raw agricultural products or processed foods, as
specified:
a) "Fruit, nuts or vegetables" as defined in Food and
Agricultural Code (F&AC) Section 42510;
b) "Meat food product" as defined in F&AC Section 18665;
c) "Poultry" as defined in F&AC Section 18675;
d) "Eggs" as defined in F&AC Section 75027;
e) "Fish" as defined in F&AC Section 58609; and,
f) Any cheese, milk, yogurt, butter, and dehydrated milk
meeting the requirements in F&AC Division 15.
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g) All of the following food items as defined in Health and
Safety Code Section 109935:
i) "Rice";
ii) "Beans";
iii) "Fruit, nuts, and vegetables in canned, frozen,
dried, dehydrated, and 100% juice forms";
iv) "Vegetable oil and olive oil";
v) "Soup, pasta sauce, and salsa";
vi) "Infant formula";
vii) "Bread and pasta"; and,
viii) "Canned meats and canned seafood."
3)Increases the existing tax credit rate from 10% to 15% and
specifies that the credit value is calculated, with reference to
the qualified value (QV) of the QDI, instead of inventory costs.
4)Defines a "qualified value" as either of the following:
a) The weighted average wholesale sale price based on the
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QT's total wholesale sales of the donated item sold within
the calendar month of the QTs donation; or,
b) If no wholesale sales of the donated item have occurred in
the calendar month of the QT's donation, the QV shall be
equal to the nearest regional wholesale market price for the
calendar month of the donation based upon the same grade
products as published by the United States Department of
Agriculture's Agricultural Marketing Service, or its
successor.
5)Requires donors to provide item value and information regarding
where the donation items were grown or processed to food banks
and requires the food banks to issue certificates with respect
to donated items.
6)Authorizes the Franchise Tax Board (FTB) to request copies of
any certificates.
7)Requires the FTB to include in its annual report the estimated
value of the QDIs, the origin of the QDIs, and the month the
donations were made.
8)Renames, on or after January 1, 2016, the State Emergency Food
Assistance Program (SEFAP) as the CalFood Program (CFP).
9)Requires the CFP to provide food and funding for the provision
of emergency food to food banks established pursuant to the
federal Emergency Food Assistance Program.
10) Specifies that all monies received by the CFA, upon
appropriation by the Legislature, must be allocated to the State
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Department of Social Services (SDSS) for allocation to the CFP.
11) Repeals the tax credit program on December 1, 2021.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)Potentially significant General Fund (GF) costs to FTB to
administer changes to systems and procedures; no change to DSS
costs, which are reimbursed with federal funds received under
the program.
2)Estimated GF revenue decreases of $0.4 million, $1.0 million,
and $1.4 million in FY 2015-16, FY 2016-17, and FY 2017-18,
respectively.
COMMENTS:
1)Author's Statement: The author has provided the following
statement in support of this bill:
California is the leader agricultural producer in the
U.S., yet many Californians still suffer from hunger
and poor nutrition. AB 515 will broaden the existing
state tax credit offered to agricultural producers for
donations to qualified California non-profits, such as
food banks. It expands the list of eligible products
to include other fresh items and a limited set of core
shelf-stable items. It also moves the tax credit to
20% of the donation items wholesale value, and extends
the sunset of this program to 2021.
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2)Existing Tax Credit Program. Under PIT and the CT laws, a
qualified taxpayer is allowed a tax credit, in an amount equal
to 10% of the inventory costs of the fresh fruits or fresh
vegetables donated to food banks located in California. (AB
152 (Fuentes), Chapter 503, Statutes of 2011.) According to
the Capital Area Food Bank's (CAFB) Web site, California is
ranked 19th for food insecurity nationwide, with a food
insecurity rate of 16.2%, which translates into 6.1 million
Californians with, on average, one-in-six people in California
not knowing where their next meal will come from. All the
more troubling is that the child food insecurity rate is
26.3%, meaning 2.4 million, or more than one-in-four children,
in California may go to bed hungry each night. CAFB
represents 42 food banks throughout California that provide
food to soup kitchens and food pantries in schools, churches,
and community and senior centers. CAFB partners with over 100
California growers and packers and distributed 140 million
pounds of food to people in need.
The Scope of this Bill. This bill broadens the scope of what
would be considered a qualified donation item and redefines
the computation of the credit amount. This bill also
increases the rate of the credit from 10% to 15% and expands
the definition of a qualified taxpayer. The proposed expanded
scope of the program would theoretically increase donations
simply by widening the available pool of both participants and
products, even without the higher credit rate. In some cases,
a qualified taxpayer may be more inclined to contribute a QDI
simply because he/she is not able to make a profit by selling
his/her products. In those instances, receiving the current
10% credit would be enough of an incentive. Receiving a
larger credit may go beyond what is needed to encourage the
desired result.
3)Tax Expenditure vs. Direct Expenditure. Existing law provides
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various credits, deductions, exclusions, and exemptions for
particular taxpayer groups. In the late 1960s, United States
Treasury officials began arguing that these features of the
tax law should be referred to as "expenditures" since they are
generally enacted to accomplish some governmental purpose and
there is a determinable cost associated with each (in the form
of foregone revenues).
As the Department of Finance notes in its annual Tax
Expenditure Report, there are several key differences between
tax expenditures and direct expenditures. First, tax
expenditures are reviewed less frequently than direct
expenditures once they are put in place. Second, there is
generally no control over the amount of revenue losses
associated with any given tax expenditure. Finally, absent a
sunset date, a two-thirds vote is required to rescind an
existing tax expenditure once enacted.
Tax credits are generally used to encourage socially
beneficial behavior, to provide relief to taxpayers who incur
specified expenses, or to influence behavior (including
business practices). In contrast to the value of a deduction
to a taxpayer, the value of a tax credit is the same,
regardless of the tax rate. Thus, a tax credit is generally
more appealing to taxpayers. Furthermore, charitable
deductions allowed to corporate taxpayers are limited to 10%
of the taxpayer's net income and thus a tax credit for the
same donations will be more valuable to a corporate taxpayer.
4)Qualified Taxpayers Outside California. This bill provides
that a credit equal to 15% will be given to qualified
taxpayers that donate qualified items to food banks in
California. Qualified taxpayers located in as well as outside
of California are able to claim the credit as long as they
meet the applicable requirements and donate qualified items.
It is unclear whether the benefits of potentially increasing
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the amount of donated food outweighs the costs of subsidizing
producers located, and economic activities performed, outside
of California.
Analysis Prepared by:
Oksana Jaffe / REV. & TAX. / (916) 319-2098 FN: 0000636